Remittances save the Philippines
By Joel D Adriano
MANILA - Despite the global economic downturn, foreign remittances have held up surprisingly well in the Philippines, providing the economy a desperately needed capital boost as new foreign direct investment (FDI) is reduced to a trickle.
Rather than returning home and swelling the ranks of the unemployed, Filipinos continue to find offshore job opportunities amid hard economic times.
Labor Secretary Marianito Roque said overseas Filipino workers' (OFW) remittances reached nearly US$7 billion from January to May this year, representing a 2.8% increase from the $6.79 billion recorded over the same period last year. Although the growth is down substantially from the double digit expansion |
witnessed in previous years, the overall value reached a record monthly high in May at $1.48 billion.
Roque has predicted that OFW remittances will likely reach a record $17 billion this year, with the bulk of inflows coming mainly from the United States, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, Italy and Germany. An estimated 10 million OFWs sent home $16.4 billion last year, making the Philippines the world's fourth largest recipient of remittances, trailing only India ($45 billion), China ($34 billion) and Mexico ($26 billion), according to the World Bank.
At the same time, FDI into the country continues to contract, falling to a mere $44 million in the first quarter of this year, a staggering 83% decline over the same period in 2008. The decline marks a disturbing down trend: total FDI fell from $2.91 billion in 2007 to $1.52 billion last year, marking a 48% year-on-year decline. Analysts attribute the downturn broadly to waning foreign investor interest in Philippine manufacturing compared with other low-cost countries in the region.
Economic analysts had predicted OFW remittances would similarly diminish, based on expectations that a sagging global economy would lead to greater lay offs, particularly among industrial and construction workers. Citibank, the International Monetary Fund, the World Bank and credit rating company Moody's all predicted remittances would decline this year, ranging from 5% to 7.5%, dragging the economy to negative or, in the most optimistic case scenario, zero growth.
Economic growth crawled to just 0.4% in the first three months of the year and economic officials have downgraded their previous economic growth targets of between 3.1% to 4.1% to a lower range of 0.8% to 1.8% for 2009. But the local economy has shown signs of resilience compared to its more export-driven neighbors thanks to the sustained demand for Filipino workers abroad and the boost their remittances have provided to domestic demand.
The growing number of Filipinos leaving for work overseas has more than offset the number that has lost their jobs due to the global economic recession, officials say. Around 1.38 million were dispatched for work overseas last year, up 30% on the 1.08 million that left in 2007, official statistics show. This is part reflects recent hiring agreements the government has signed with Qatar, Saudi Arabia, Canada, Australia, Japan and South Korea.
Recession-proof jobs
GlobalSource, a New York-based independent research and analysis outfit, said in a recent report that while it expects remittances to slow in the coming months, the resilience so far may be attributed to the fact many OFWs are employed in recession-proof sectors, such as healthcare, education and government service.
Some big Philippine corporations, ranging from fast-food giant Jollibee to mobile-phone operators and property developers, remain worried that the slow rise in remittances will dampen profits. Seasonally adjusted personal consumption expenditure, which accounts for roughly 80% of GDP in the Philippines, was down 3.1% in the first quarter after more than 50 consecutive quarters of positive growth.
Socioeconomic planning secretary Ralph Recto said the global crisis has encouraged Filipinos to cut back expenditures and increase savings. But that may be a temporary phenomenon. With the US declaring the worst of the global economic crisis over, President Gloria Macapagal-Arroyo clearly expects to see better numbers in upcoming quarters as her government's fiscal stimulus package is expected to bump up consumption in the second half of this year. Meanwhile, another surge in spending is expected as the country enters a campaign season for local and national level seats.
Neither, economists say, offers a long-term solution to the country's dependence on remittances. Economists have long complained that the government fails to use the billions of dollars earned overseas and sent home to pull the fast-growing population out of poverty, generate jobs and ultimately cap outward migration. The Philippines would have more than 26.5 million poor, out of a population of 96 million, without the current level of OFW remittances, according to economist Ernesto Pernia. Regions (of the Philippines) with more OFWs, his research found, have benefited economically and helped to reduce poverty.
According to economist and former budget and management secretary Benjamin Diokno the Philippines must create between 1 million and 1.5 million jobs each year to keep pace with the high population growth and new job-seeking graduates. Data from the Employers Confederation of the Philippines, a trade group, shows that the informal economy accounts for about 70% of the labor force.
That, according to the non-government organization Migrante, will continue to force Filipinos to seek greener economic pastures abroad. An IMF-commissioned study recently said that foreign remittances foster dependency and "moral hazard", where many people lose the incentive to work because of funds sent by their kith and kin. It's a dependency that drives the Philippine economy and one that the current receding global economic crisis has clearly failed to break.
Joel D Adriano is an independent consultant and award-winning freelance journalist. He was a sub-editor for the business section of The Manila Times and writes for ASEAN BizTimes, Safe Democracy and People's Tonight.
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PERSONAL INSIGHT:
It is indeed seen nowadays that the Philippine economy is facing a problem. Filipinos aren't assured of sustaining its economy nor even increasing it. As time passed more and more situations interfere especially on the issues of money. Stock markets are getting lower and we find it hard to regain the economy of the Philippines in a year or two.
We've seen that because of the lack of jobs offered in the Philippines and the problem of the rapid increase of the prime commodity many of Filipinos plan to look for a greener pasture outside the country.
As the poverty increased in the Philippines more Filipinos found better paid jobs abroad. Through this, Filipinos abroad are also one of the co-helper of the government in sustaining and making the country's economy better. As to the remittances sent to the families of the OFW's it increases the value of peso vs other currency. The more remittance means the more opportunity of increasing its economy.
Thus, even with this remittances, still government and its people should still work hand in hand in making its economy better. Not just to sustain a good image for the country but most especially to give better life for its people. We should also take into consideration the extra effort of the OFW's who work abroad to help their families and at the same time helps the country with its economic issues. |
